Tunisia - Second Fisheries Project

Document of The World Bank FOR OFFICIAL USE ONLY FIE FILE COPy"Y Report No. 2436a-TUN STAFF APPRAISAL REPORT OF THE SECOND FISHERIES PROJECT TlJNISIA June 6, 1979 EMENA Projects Department Agriculture Division II This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Rank authorization.  CURRENCY EQUIVALENTS (As of March 31, 1979) Currency Unit = Tunisian Dinar (D) D 0.4 = US$1.00 D 1.00 = US$2.50 D 1,000,000 - US$2,500,000 US$1,000,000 - D 400,000 WEIGHTS AND MEASURES (Metric System) 1 t = 1,000 kg 2,205 lb 1 km = 0.621 mi 1 km2 = 0.386 sq mi Im = 3.281 ft 1 Im2 10.75 sq ft 1 m3 = 35.315 cu ft GOVERNMENT OF TUNISIA Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY ABBREVIATIONS BNT Banque Nationale de Tunisie - National Bank of Tunisia CLCM Caisse Locale de Credit Mutuel - Mutual Credit Bank DSP Direction des Services des Peches - Directorate of Fisheries FAO-CP Food and Agriculture Organization Cooperative Program FOSDA Fonds Special de Developpement Agricole - Special Fund for Agricultural Development FOSEP Fonds Special d'En.couragement a la Peche - Special Fund for Fisheries Development GDP Gross Domestic Product ICB International Competitive Bidding INSTOP Institut Scientifique et Technique d'Oceanographi et de P'eche - Institute c,f Science and Technology for Oceanography and Fisheries ONP Office National des Peches - National Office of Fisheries MSY Maximum Sustainable Yield HARBOR DEPARTMENT Department of Harbors and Aerial Bases in the Ministry of Equipment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   TUNISIA STAFF APPRAISAL REPORT OF THE SECOND FISHERIES PROJECT Page No. I. THE AGRICULTURAL SECTOR AND THE FISHERIES SUBSECTOR ....................................... 1 A. The Agricultural Sector ...................... 1 B. The Fisheries Subsector ...................... 2 C. Bank involvement in the Subsector .... ........ 10 D. The Project Area ............................. 13 II. THE PROJECT ....................................... 14 A. Project Preparation and Location .... ......... 14 B. Project Objectives ........................... 14 C. Project Description .......................... 15 D. Cost Estimates ............................... 20 E. Financing .................................... 22 F. Procurement .................................. 24 G. Disbursements ................................ 26 H. Project Accounts and Audits .... .............. 28 III. PROJECT IMPLEMENTATION AND EXECUTING AGENCIES 28 A. Borrower and Project Execution .... ........... 28 B. Implementation Schedule ...................... 32 C. Operation and Maintenance .................... 32 D. Cost Recovery ................................ 33 E. Monitoring and Reporting ..................... 34 IV. PRODUCTION, MARKETING AND DEMAND .... .............. 34 A. Production Parameters of the Project ......... 34 B. Total Production ............................. 37 C. Marketing .................................... 37 D. Domestic and Export Demand ................... 39 This report is based on the findings of an appraisal mission in October/ November 1978, consisting of Mr. J. Duester and Miss M. Varkie (Bank), and Messrs. D.R.P. Farleigh and N. Quere (Consultants).  Table of Contents (Continued) Page No. V. FINANCIAL ANALYSIS .................................. 40 A. Fish Prices and Market Assumptions .... ......... 40 B. Financial Analysis ............................. 41 VI. PROJECT BENEFITS AND ECONOMIC JUSTIFICATION ......... 41 A. Project Benefits ............................... 41 B. Economic Analysis .............................. 43 VII. RECOMMENDATIONS AND LOAN CONDITIONS ......... ........ 45 ANNEXES 1. Table 1: Total Project Cost and Schedule of Expenditure 47 Table 2: Disbursement Schedule .......................... 50 Chart 1: Organization Chart of Fisheries Authority ...... 51 Chart 2: Project Implementation Schedule .... ............ 52 2. Incremental Fish Production Under the Project .... ........ 53 3. Table 1: Economic Prices of Fish ........................ 54 Table 2: Economic Rate of Return ........................ 55 Table 3: Economic Rate of Return Analysis Summary ....... 56 4. Selected Documents and Data Available in the Project File ............................................. 57 MAPs Maps IBRD Nos. 14165, 14166, 14167, 14168, 14169, 14170  I. THE AGRICULTURAL SECTOR AND THE FISHERIES SUBSECTOR A. The Agricultural Sector 1.01 Tunisia covers an area of 164,000 km2 and has a coastline of about 1,300 km. In 1977, the population was about 5.9 million, and the average annual population growth rate during 1966-1975 was 2.3x. 1.02 The country is rather poorly endowed with an agricultural resource base. Much of the land is arid or semi-arid, with most of the agricultural activity concentrated along the coast and in a few oases. A little over one-third of Tunisia's total land area, or about 5.3 million ha, is classified as cultivable. The main crops are wheat and olives. These crops are subject to sharp year-to-year output fluctuations, because of irregular rainfall in the case of wheat and changes in the natural output cycle for olives. Agri- culture plays an important role within the Tunisian economy. In 1977, agri- culture, including fisheries, accounted for 16% of gross domestic product (GDP), employed 35% of the total labor force and yielded 16% of total exports. Over the period 1970-1977, GDP in the agricultural sector including fisheries grew at a compound rate of 6.8% p.a. in real terms. During the Fourth Devel- opment Plan (1973-1976) agricultural exports were nearly equal to food imports (on average D 74 million annually exported compared to D 76 million imported). Fluctuations in agricultural output continue to have a major impact on the country's economic performance. During 1977 there was a decline in agricul- tural production by 9.1% from the 1976 level, primarily due to bad weather conditions. This factor, in particular, was responsible for the comparatively weak overall growth in GDP in 1977, which declined from 7.5% in 1976 to 2.8% in 1977. 1.03 To achieve the Government's main development objective in agriculture, which is a balanced commodity trade in foodstuffs by 1981, total agricultural output would have to grow at a rate of about 7% p.a. However, the Bank's revised estimates of agricultural growth 1/ indicate that over the Fifth Plan Period (1977-1981), the growth rate will only be 3.3% p.a. This is due to a growth rate of -1.2% p.a. in 1977 and 1978 when imports grew by 10% p.a. instead of 7.7% p.a. as planned and exports by only 4.9% p.a. instead of 9.9% p.a. Achievement of the projected growth rate would still depend on favorable weather conditions, but greater availability of credit, implementation of land reform and introduction of conducive price policies would contribute to an improvement in the growth rate. 1/ Tunisia: Economic Position and Prospects Country Economic Memorandum IBRD November 1978.  -2- B. The Fisheries Subsector= Production 1.04 In 1977, fisheries contributed to about 6% of GDP in the agricul- tural sector. During the period 1970-1977 the growth rate of GDP in the fisheries subsector alone was higher than that in the agricultural sector, excluding fisheries (8.8% p.a. as compared with 6.7% p.a.). In terms of output, over the same period fish production grew from 27,800 t to 54,000 t, an increase of almost 9.9% p.a. However, in spite of the production increases, the present catch level falls far short of satisfying the potential demand for fish and represents a per capita consumption of only 7 kg per year in Tunisia compared with a consumption of 13 kg in Italy, 15 kg in France, and 39 kg in Spain. Consequently, the Fifth Plan aims to increase per capita consumption, to 9 kg in 1981 by raising fish production to 88,000 t. To achieve this target, the Plan foresees investments of D 46 M (US$115 M) for equipment, research and training, and development of harbor and related facilities. Although this amount represents only 9% of total agricultural investments during the Fifth Plan, the average annual investment for fisheries during 1977-1981 is about twice that planned for the Fourth Plan (1973-1976). 1.05 A breakdown of the 1977 fish production of 54,000 t shows that coastal fishing was the most important category with a catch of 23,800 t. Lamparo fishing 1/ accounted for 15,400 t and trawler fishing for 10,600 t. The remaining 4,200 t were attributable to lagoon fishing, tuna fishing, fishing for crustaceans and mollusks, sponge and coral fishing. In 1977, fish exports represented 7% of total agricultural exports as compared to 3% in 1970. The main species exported have been shrimp, octopus and lobster. Most of the catch is consumed fresh on the domestic market with the remainder, about 15,000 t in 1977, being processed by canning plants for both domestic and export markets. Fish Resources and Existing Facilities 1.06 Pelagic 2/ fish resources in Tunisian waters have been estimated in 1972-1974 to be 580,000 t with a maximurm sustainable yield (MSY) of 150,000 t. About 16,500 t, equivalent to 11% of this MSY were exploited in 1977. The objective of the Fifth Plan is to bring production up to 33,000 t which would mean exploitation of 22% of MSY. This is a very ambitious target given the fact that lamparo fishing and tuna fishing are capital intensive operations and require well-trained crews. Fishing for pelagic species is highly competi- tive and along the northern coast of the country is a continuous source of dispute between fishermen from neighboring countries. 1/ Lamparo fishing involves the use of lights to attract fish, which are then caught in seining operations by lamparo fishing units consisting of a carrier boat and two or three small boats. 2/ Pelagic fish live in open waters and frequently migrate, e.g. tuna, - mackerels, sardines, anchovies.  - 3 - 1.07 Demersal 1/ fish resources have never been properly assessed. Appropriate stock assessment studies are urgently needed to direct future Government policies and to avoid possible over exploitation, although there are at present no signs of overfishing in any of the Tunisian fish ports. Stocks and MSY estimates of demersaL fish caught by artisanal coastal fisheries are more difficult to make than those for trawler fishing because of the selective fishing methods used. Only certain fish sizes are caught which are not representative of the total fish population. The MSY estimates that were made vary between 50,000 t and 80,000 t. The 1977 production of 34,400 t (23,800 t coastal and 10,600 t trawler fishing) therefore leaves ample scope for increases. This is especially true since there are still rich unexploited fishing grounds beyond the three nautical miles reserved for coastal fisheries in the northern part of the coast and beyond the depth of 50 m reserved for coastal fishing in the southern part. Beyond these limits all other types of fishing, including trawlers are perrmitted. 1.08 At present about 45 fishery harbors including small shelters are scattered along the Tunisian coast. Major ports, such as Tabarka, Bizerte, La Goulette and Sousse in the northern half, and Mahdia, La Chebba, Sfax, Gabes and Zarzis in the southern half (Mao No. 14165), are most]Ly used by trawlers and lamparo units. They are all equipped with basic facilities including access roads, water and electricity supply. However, the majority of landing sites used by coastal fisheries excLusively like Ghar El Melh, Monastir, Saiada, Teboulba, Salakta, La Skhira and Houmi: Souk on Djerba Island is not wiell equipped and very often does not provide even a basic shelter for boats. 1.09 The total continental sheLf area along the Tunisian coast down to -200 m depth covers approximately 77,000 km2. Of this about 17,500 km2 are reserved for coastal fisheries in accordance with the limits given in para. 1.07. 7,000 km2 are in the northern zone and 10,500 km2 from Mahdia to the south. The northern zone is characiterized by a narrow conitinental shelf, a rocky coast and small tidal ranges, and the southern zone by gently sloping foreshores resulting in a wide continental shelf and large tidal ranges of up to 2 m at Gabes. The distribution of area exploitable for coastal fishing activities in each half of the coastline is about 40% in the north and 60% in the south, while actual production is only 15% and 85% of the total produc- tion in the north and in the south zones respectively. This distortion results from lesser fishing activity in the north, due to a lack of adequate port facilities and adequate boats, which would be able to withstand the rougher sea conditions especially in wintertime. Construction of small ports for coastal fishing is further constrained by difficult topographical conditions in the north between Tabarka and Bizerte. Fully protected ports in deep waters are costly and very often not economically justified. The proposed Project is based on a careful investigation of all the possibilities and has found that only the following sites could be developed economically. They are Sidi Daoud in the Gulf of Tunis, and Beni Khiar and Hergla in the Gulf of Hammamet. In the southern part of the coast line the most restraining factor 1/ Demersal fish are bottom water fish, e.g. mullets, perches, bass, breams.  - 4 - is the lack of port infrastructure in sufficient water depth to allow fishing activities at all tidal ranges. At present the rowing and sailing boats and the light motor boats used can only go out fishing at high tide. The few existing fishing ports are almost totally lacking in shore facilities such as ice-making plants, cold stores, and boat repair facilities, resulting in poor fish quality and down time for motorboats. 1.10 To tap the substantially unexploited fish resources of the coastal areas, Government needs to construct new ports and further equip existing ones, especially in the south. Fishing boats adapted to rough sea conditions in the north also need to be constructed. Fishing Population 1.11 It is difficult to determine the exact number of fishermen in Tunisia. Estimates vary from 18,000 to 22,500. Assuming that about 12 crew members operate each trawler, 3 of them each coastal boat and about 14 each lamparo fishing unit, the number of fishermen involved in coastal fishing would be 16,600 and the total number 22,500. However, taking into account the fact that the fishermen owning rowing or sailing boats could also be involved in other fishing activities in certain times of the year (lamparo, trawling), a more realistic figure for coastal fishing would be about 12,000. 1.12 In the past, rural migration has affected the fisheries subsector in Tunisia, especially young people, who have found better opportunities in the tourist industry which has flourished along the coast between Hammamet and Sousse, on Djerba Island and to a lesser extent on the Kerkennah Islands. However, since the growth of the tourist industry has now slowed down, these opportunities are getting more scarce and with the modernization of the fishing industry, and the high demand for fish, it is expected that the subsector will be attracting more and more labor which would be supplied mainly from the agriculture sector where unemployment and underemployment is high. Fisheries training schools and vocational training centers are available to train young people as crew members for coastal fishing boats. 1.13 Training. The responsibilities for training fishermen and craftsmen of related industries are shared between the Directorate of Fisheries within the Ministry of Agriculture (DSP), which operates three training schools and five vocational training centers and the Rural Development Program under the Ministry of Planning, which operates another six vocational training centers. In 1977, a total number of 950 students were enlisted in these training schools and centers. Training schools offer a two-year course and the annual number of students awarded diplomas is about 45 skippers, 25 mechanics and 20 marine carpenters. In 1977, the training centers gave one-year courses to 463 participants of which 301 were trained as fishermen and 107 as engine operators. There has been little coordination between the Ministries of Agriculture and Planning regarding training facilities and programs. Training standards are not uniform and there are long delays in awarding diplomas and certificates as this responsibility lies with yet another Ministry, namely the Merchant Marine Department under the Ministry of Transport and Communications. Training is  free and includes full board. The budgetary allocations for training are usually sufficient to cover the most urgent needs of the cost of boarding the students and teachers' salaries. However, training equipment and demonstra- tion material are not available in sufficient quantities. 1.14 The majority of students attending the schools come from rural areas, mainly landless farmers. Fishermen do not send their children to training schools or training centers beause they prefer to train them them- selves. However a great many of the fishermen already in the profession need some on-thle-job training to bring their knowledge of fishing techniques, boat opeiition and boat maintenance up-to-date. This kind of training is not availabli. 1.15 Research. Basic fisheries research is carried out by INSTOP (Institut Scientif,que et Technique d'Oceanographie et de Peche), which is supervised by DSP. Iii.TOP has been involved in exploratory trawling and shrimp research and has undt7taken pollution studies, but to date no research has been done on the availab>e resources of demersal fish (para 1.07). This is because of lack of priorit- planning and coordination between DSP and INSTOP. Fishing i'leet and Fishing Techniques 1.16 The b,ggest quantity of fish is landed by the coastal fishing fleet, which iL:ludes rowing, sailing and motorboats of up to 13 m overall length. Coastal lishing activity is found everywhere along the Tunisian coast with boats m( ,red in existing ports, on beaches and in river mouths. It represents the tra:i,tional sector of Tunisian fisheries and in 1977 accounted for about 44% of ,)tal cacch. 1.17 Lamparo fishing is used to catch pelagic species, mainly sardines, anchovi s, mackerels and horse mackerels. The main fishing ports for lamparo fishing are Mahdia, La Chebba and Sfax, where about 195 seining units are station S. This type of fishing is a seasonal operation which normally lasts from Ap:il to November. In off-season, some of the smaller boats involved in lamparc fishing switch to coastal fishing. In 1977 lamparo fishing accounted for abc,t 29% of total catch. The larger pelagic species, mainly tuna, are caught in traps (madragues) which are set up perpendicularly to the coast line in places whereX tuna migrates in May and June. 1.18 Trawlers catch demersal species on the continental shelf in depths exceeding 50 m in the sourthern zone and in distances greater than 3 nautical miles from the coast in the northern zone. About 210 trawlers of 20 to 25 m length operate along the Tunisian coast. The species caught are white and grey mullets, whiting, pandoras, breams and other demersal species. Shrimp catches are confined to the Gulf of Gabes where trawlers are also allowed. 1.19 The number of existing crafts used for coastal fishing was estimated to be about 5,000 in 1977, less thain four per km of coastline. Only about 1,400 are motorboats. The other 3,600 boats are sailing and rowing boats with a very limited operating radius. Normally the motorboats are well protected against waves arriving at the bow but less protected against waves at the  -6- stern. They frequently transport the catch on deck together with the entire fishing gear which results in quality deterioration even before the catch is landed. Rowing boats and most of the sailing boats do not have decks which make them very vulnerable to wave action. Motorboats have decks but do not provide any shelter to the fishermen and appear to have insufficient height in free board and bulwark. 1.20 The most commonly found motorboats are those of the 7 to 8 m overall length (with engines of 15 to 20 hp), which are constructed in local shipyards according to the individual requests of the boat owners. Although large numbers of this type of boat are used all along the Tunisian coast, they are generally considered to be too small for the more remote fishing grounds. The daily catch rate is low, estimated to be 35 kg, with an average of 150 fishing days per year, which brings production to about 5 t of fish per year. 1.21 Under the First Fisheries Project a new type of boat of 11.25 m overall length was developed of which 190 were sold. Despite the initial difficulties with the boat engine (para. 1.35), it is now well accepted by fishermen. Its principal dimensions are as follows: length overall 11.25 m, length at water line 9.05 m, deck width 3.35 m, draft 0.86 m, displacement 7.5 t. Recorded catches of these boats vary between 50 and 70 kg per fishing day, but it is estimated that production, including unrecorded catch con- sisting of own consumption and sales outside recording points, reaches at least 90 kg per fishing day. 1.22 Fishing Techniques. Fishing techniques used in coastal fisheries include both passive and active fish-ing gear. The floating gill net is most frequently used in catching demersal fish but the trammel net which consists of a triple netwall--two wide meshed outerwalls surrounding a rather loose interior net--is also used. Another type of fishing gear presently used is the long line, which has short and usually thinner branch lines carrying hooks at intervals. Motorboats of 11.25 m overall length are usually equipped with 15 trammel nets of 150 m length each, i.e. 2,250 m of trammel net and three long lines of 250 m each with 750 hooks. Due to the lack of training, fisher- men have not learnt to use the available techniques efficiently. 1.23 Boat Construction Capacity. There is considerable capacity for construction of wooden boat hulls in Tunisian shipyards, which are well distri- buted along the coast. The largest boat builder is ONP with four shipyards at Bizerte, Sfax, Sousse and La Chebba. The shipyards at Bizerte, Sfax, and Sousse have a total annual capacity of 80-95 boats of 11.25 m length per year. The shipyard at La Chebba does only repair work. The capacity of privately owned shipyards equals that of ONP. The two biggest of these are in Sousse (Societe de Construction Navale) with a capacity of 35-40 hulls, and in Sfax (Salim) with a capacity of 20-25 hulls. 1.24 Quality of construction varies, but with proper supervision, it is considered good. Some shipyards prepare better designs than others and obtain superior results in the assembly of main components and the quality of ,  planking. The wood used for the hull ribs is eucalyptus, which is found in Tunisia. The most important components and planking are made of iroko, which is imported from Cameroon, Gabon, Ivory Coast and Nigeria. It is a rather smooth wood, which can be worked well and in which nails and bolts hold firm. However, it has little resistance to shock and in general its characteristics are inferior to those of oak or teak. Eucalyptus, used for the ribs, is of lower quality than iroko; it is brittle, but because of the small size of the boats constructed, it is acceptable. 1.25 An experiment with the construction of ferro-cement boats has been under way for several years under the direction of FAO. Several 11.25 m and 12 m vessels have been built and a 17 m boat is under construction. However, it would not be realistic to try and promote a new type of boat and a new material at the same time in any country. Fishermen often tend to confuse the problems and can reject a good "design" because of poor workmanship; on the ot.ler hand, they tend to accept a mediocre "design" with well used material. Therefore, the FAO experiment, which consists in particular of making proto- tvpes of several types of boats, could be of interest only for the 11.25 m boats in the context of the present Project. The dimensions of the 11.25 m ferro-cement boat are close to those of the wooden boat and its conception is completely identical. If tests witlh the prototypes turn out to be successful and if it is well accepte!d by the fishermen, the boat would be built in serles. Investment costs are estimated to be similar to those of wooden boats. Fin,incing of Investments in the Subsector. 1.26 Fisheries Credit (FOSEP and IDA). The Tunisian Government has pursaed the objective of promoting fisheries investments by making available conc.~ssionary credit and subsidies to investers since 1968 through a special Gove-nment fund (Fonds Special d'Encouragement a la Peche - FOSEP) administered by BiUT. As of November 1978 FOSEP funds committed by BNT amounted to D 13.2 mill on (US$33 million) in loans and D 2.6 million (US$6.5 million) in sub- sidi.s. In addition BNT had at the same date committed D 0.9 million (US$2.0 million) in IDA funds, (Credit 270 TUN) plus D 0.16 million (US$0.4 million) in r lated subsidies. BNT does not assume any default risk for FOSEP loans, but 710% under the IDA Credit Agreement. For subloan applications DSP makes the !echnical evaluation of applicants and a committee chaired by the Minister of Agriculture gives the final approval. BNT usually assumes the privilege of final approval for IDA subloans, because of the risk involved. 1.27 As Government feels that fisheries investments are particularly needed to ensure development of important national resources and maintain the livelihood of the rural population, which have very limited employment oppor- tunities, these investments are subsidized in Tunisia. At present, the Government encourages the mobilization of domestic resources by providing subsidies of up to 40% for investments in agriculture and 15% for indivudual investments in fisheries, especially for boat purchases whose costs have doubled in the last four years. FOSEP regulations envisage 20% subsidy for investments by production cooperatives. Government subsidy for the purchase  - 8 - of motorized boats and fishing equipment applies to investments financed by both FOSEP and IDA subloans. The loan amount is 75% of investment costs at 6% annual interest. The fishermen are expected to finance the remaining 10% themselves. Up to 1977, it was common practice for fishermen to obtain an additional loan from the Rural Development Program (a Government fund estab- lished in 1973 to finance rural development projects), so that they often did not make any actual contribution to the boat acquisition. This practice was stopped in 1977 and the Program now extends only short-term credit to fishermen. 1.28 FOSEP legislation was promulgated in 1969/70 and revised in 1972 and in 1977. The last revision was undertaken with the FOSDA legislation govern- ing agricultural funds. Since the introduction of the new legislation, after a long dialogue between Government and the Bank, a uniform interest rate of 6% and uniform lending conditions for FOSDA, FOSEP and Bank financed loans in agricultural Projects have been applied. In the FOSEP ministerial decision of 1977 (Arrete) new maximum investment amounts to be considered for the determination of subloan amounts and subsidies for boats not exceeding 11 m overall length were set at D 10,000 (US$25,000) and for boats of 12 m to 16 m overall length at D 15,000 (US$37,500). These amounts are now too small and an upward revision would be needed, if investments in boats under the Project will also be governed by FOSEP. Under the proposed Project the present ceilings, if applied, would have an effect on the subsidies, which as a result of price increases would become less than 15% of the total investment costs. Fishermen's own contributions and BNT lending would have to cover the price increases. Oranizational and Institutional Constraints of the Subsector 1.29 There are several ministries and agencies involved in the administra- tioni of the fisheries subsector; the most important being the Directorate of Fislheries (Direction des Peches - DSP) in the Ministry of Agriculture, the Department of Harbors and Aerial Bases in the Ministry of Equipment (Harbor Department), the Merchant Marine Department under the Ministry of Transport and Communications, the Rural Development Program under the Ministry of Planining, and the Office National des Peches (ONP). (Details of ONP are in the Project File). The responsibilities of these various agencies are widely overLapping and not clearly defined. Each of these agencies is concerned in achieving their own short-term goals rather than the nationally perceived needs of the subsector. The lack of coordination and cooperation between them has led to difficulties in agreeing on action to be taken in the sub- sector and has therefore resulted in contradictory policy making decisions. All these factors have led to a weak and inefficient administration of the subsector. Because of these institutional weaknesses, project preparation and implementation have, more than in other sectors, encountered difficulties, which although eventually resolved, have cost the Government time and money (paras. 1.35-1.40 and 2.01). 1.30 DSP is normally entrusted with formulation of fishing policies, (in the absence of a functioning Superior Fisheries Council), enforcement of fishing regulations, issuance of fishing permits and export licenses, collec- tion of production data and preparation of statistics, training, fisheries  research and development, and administration of the coastal fishing fleet. DSP has 8 regional and 11 local offices, (Arrondissement des Peches) with a total staff of about 110, i.e. about 10 staff per 100 km of coast, most of them concentrated in the important fishery centers. DSP has been plagued by lack of budgetary allocations and hence there has been a chronical shortage and frequent exchange of personnel which has had a detrimental effect on the whole administration of the subsector. This has resulted in inefficient extension work, unreliable fishery statistics, lack of proper research and very often the abandonment of regulatory and training functions to parastatal organizations such as ONP. These weaknesses have often led to conflict of interest because the agencies involved are themselves fishing operators (ONP) and do not have the legal status to carry out the tasks assigned to them. 1.31 The Harbor Department is responsible for the construction and main- tenance of all port facilities. It also manages a number of fish ports and shore facilities, a task which it shares with ONP and the municipalities. The harbor master is responsible for the entire supervision of the port activities and is under the jurisdiction of the Harbor Department. At present the actual operation of the port and shore facilities is run by dif- ferent agencies in each port. Responsibilities are not clearly defined and because of the lack of communication between agencies there are difficulties in identifying problems, ensuring proper maintenance and planning for new construction. 1.32 The Merchant Marine Department is responsible for navigational security services, personnel management of seamen and fishermen, the fishing fleet and fishing facilities. It approves boat designs, supervises construc- tion and delivers certificates of inspection. While it approves the designs for each boat type it hardly carries out any supervision during boat construc- tion, leaving the shipyards and especially those of ONP at liberty to intro- duce modifications in the design in accordance with the wishes of individual fishermen. This department is more involved with the merchant marine and is ill equipped to supervise and direct fishing activities. Banque Nationale de Tunisie - BNT 1.33 BNT is the only source of institutional credit to the fisheries subsector. It was established by Government's initiative in 1959 to provide agricultural credit. It also performs all normal banking and financial operations. Fisheries lending is centralized in BNT's headquarters, its branch offices along the coast are only involved in the initial creditworthi- ness examination of loan applicants. Government funds for fisheries (FOSEP) and the IDA financed loans (para 1.26) are channelled through BNT to the fishermen (paras.1.38-1.40).  - 10 - Conclusion 1.34 Both physical and institutional constraints are presently hindering development in the fisheries subsector in Tunisia. A comprehensive development strategy for coastal fisheries would need to include the following actions: (a) development of marine and shore facilities to harbor fishing fleets, handle fishermen's production and service their fleets. This would mean adding new fishing ports and modernizing existing ones wherever it is technically and economically feasible. Modernizing existing ports would involve extending existing facilities to allow for operations at all times and equipping the ports with additional shore facilities; (b) provision of adequate equipment mainly boats and fishing gear. This would include design of a new type of boat, especially for the northern coast, capable of sustaining rough weather condi- tions and modernization of the largely outdated fleet along the coast; (c) establishment of a central Fisheries Authority with well defined responsibilities, budget and staff to: (i) make clear policy decisions on the subsector; (ii) initiate and plan a fisheries development strategy, including promotion of public and private investments; (iii) implement the regulatory functions in progress in the subsector; (iv) promote training and research; and (v) administer the country's fisheries resources and Government's fisheries investments along the coast. C. Bank Involvement in the Subsector 1.35 In 1971, IDA made available an amount of US$2 million to the Tunisian Government under a Credit Agreement (Credit 270-TUN) mainly to finance the procurement of about 335 boats with inboard engines and spare parts. The number of boats was later reduced to 190, due to increases in investment costs. A new boat design developed after Credit signature was found to be generally unacceptable by the fishermen and had to be altered. An existing boat design with slight modifications was finally accepted. Procurement difficulties arose due to the Bank's insistence on complying with agreed ICB procedures and on awarding the engine contract to the lowest evaluated bidder, whereas DSP would have preferred an award to a firm selling locally assembled engines. The stated preference of the authorities was based on the fact that the locally assembled engines were already well accepted by the fishermen in Tunisia, while the marine version of the lowest evaluated bidder's engine was  - .11 - not known to them. This engine was more sophisticated and also had a better technical performance than the locally assembled engine. DSP eventually accepted the Bank's views, but because of accumulated delays in the boat design and engine procurement, the first boats were delivered to fishermen only at the end of 1974 more than three years after Credit signature. 1.36 The new boatowners were not used to the electrical starting system attached to the engine which at the beginning led to quite a number of break- downs, caused by mishandling or dead batteries. Moreover, insufficient training was given to fishermen and service facilities, especially for the engine, were not available. The engine supplier's general agent in Tunis did not fulfill the obligations under the contract to establish sub-agencies in all ports. In the towns where sub-agencies were established, the agents were reluctant to incur the high costs of storing spare parts for the boat engines as the turnover was slow. This resulted in boats remaining unrepaired for weeks. It was only in 1977 that DSP created mobile workshops which have helped fishermen substantially. 1.37 As a result of these difficulties, there was a long delay in Project implementation, because initial boat sales were sluggish and picked up only after DSP had introduced a mobile repair unit which made periodic visits to ports and was also available on call to do repairs free of charge. The closing date of the Credit has been postponed to December 31, 1979. The last boats are likely to be sold by June 1979 and the remaining amount of US$152,000, undisbursed under the Credit, will be used to make supplementary loans for fishing gear and to pay the outstanding bills for boat construction (US$66,600). Subloan Conditions and Loan Recovery 1.38 Under the First Fisheries Project, the Tunisian Government on-lent the Project funds under a Subsidiary Loan Agreement to BNT at an interest rate of 3%. BNT assumed 50% of the risk on IDA funds only. Other funds, namely FOSEP funds, were managed by BNT on behalf of Government against an annual commission of 3% but with no risk to BNT. BNT then made subloans to individual fishermen at 6% with a duration of eight years, giving BNT an interest rate spread of 3% to cover its administrative costs and the default risk. All subloans to fishermen (FOSEP and IDA financed) were made centrally at head- quarters upon the recommendation of DSP. BNT's branch personnel was involved in fisheries loans only at the application stage when the branches had to give their opinion on the applicant's creditworthiness. Loan administration was carried out centrally from headquarters, which led to the situation where branch personnel normally had no direct: contact with fishermen after the ini- tial creditworthiness evaluation. This differs from the lending practices in agriculture, where farmers receive annual seasonal credits from the bran- ches and remain in constant contact with branch personnel. 1.39 The repayment performance under subloan agreements between BNT and fishermen has been low due to several reasons:  - 12 - (i) A large percentage of fishermen have received funds from the Rural Development Program to finance the required 10% advance payment for the acquisition of boats. Most of the fishermen have regarded this as a grant rather than a loan, and have gradually begun to regard BNT loans as grants also. In effect, fishermen have contributed nothing towards the acquisition of their boats. They have therefore been less inclined to take good care of their boats and have not even been too concerned about losing their boats in legal proceedings after loan default. (ii) Fishermen have used various excuses to avoid paying their debts. The most common complaint has been that the boat has not been operating due to technical defects and therefore, there has been no income available to repay the loan. Initially neither DSP nor BNT had sufficient personnel to verify the situation. (iii) The total lack of cooperation between BNT and DSP in attempting to recover loan repayments has aggravated the situation. DSP is reluctant to become involved in loan collection, claiming that this is BNT's role, and BNT maintains that it cannot undertake effective loan supervision without the assistance of DSP. (iv) Credit supervision and a collection system of fisheries loans by BNT has been non-existant in the past. None of the twenty BNT branch offices along the coast had a collection agent. 1.40 The effect of these deficiencies has been disastrous on the recovery rate defined as the ratio of total principal and interest collected to total loan and interest amounts fallen due. It declined steadily to a low of about 6% in September 1978 for IDA financed loans. Bank supervision missions have frequently proposed specific measures to correct the situation, but it was only during pre-appraisal and appraisal of the proposed Project in July and October 1978 that DSP as well as BNT recognized the seriousness of the situation and adopted concrete measures to rectify it. These measures con- sisted of: (i) improvement in the cooperation between DSP and BNT's technical services at the central and regional levels; (ii) the recruitment of seven BNT recovery agents by March 1979; (iii) the agreement of the Ministry of Agriculture to instruct DSP to link renewal of fishing licenses and granting of subsidies on fuel to loan recovery; (iv) opening of legal proceedings against loan defaulters which resulted in the seizure of seven boats in March 1979. During negotiations, a program for recovery of subloans under the First Fisheries Project was agreed upon which foresees an improvement of the recovery rate to 40% by the end of 1979 and to 75% by the end of 1982.  - 13 - D. The Project Area Location and Climatic Conditions Coastline 1.41 The coast of Tunisia extends eastward from the Algerian frontier, 10 km west of Tabarka to Cap Bon, and southward to the Libyan border, 6 km east of El Ketef. The coast has three large bights, the Gulfs of Tunis, Hammamet and Gabes. Off the coast there are several rocks, dangerous shoals and islands, the largest of which are La Galite, the Kerkennahs and Djerba (Map No. 14165). 1.42 The coastline of about 1,300 km including the islands, may be sub- divided into two zones each with different characteristics. The northern and north-eastern zone, from Tabarka to Mahdia, is mainly bold and rocky and is dominated, particularly in the north, by the eastern flank of the Atlas Mountains. It has a very narrow Continental Shelf with steep foreshores backed by rock cliffs, which are interspersed with pockets of sandy beach and broken occasionally by small estuaries and lagoons. The south-eastern zone from Mahdia to the Libyan border, on the other hand, has flat, arid hinter- lands and sandy, gently-sloping foreshores with, for example, depths of only 5 m at distances of 3 to 12 km offshore of Sfax. Tide, Wind and Wave Activity 1.43 To the north of Mahdia the tidal ranges are small, rarely exceed- ing 40 cm, and the tidal currents are correspondingly weak. To the south of Mahdia the tides are larger, with spring tidal ranges in the Gulf of Gabes increasing from 1.6 m at Sfax to over 2 m at Gabes, but tidal and wind-driven currents seldom exceed 0.5 m/s. 1.44 On the northern coast of Tunisia strong winds and gales blowing over considerable fetches from W and NW predominate throughout the year (Map No. 14166), generating an east-going current and raising high seas, with wave heights in deep water exceeding 4 m on an average of 7 days a year (Map No. 14170). Being exposed to such wave action necessitates the construction of massive and costly breakwaters to obtain adequate shelter for vessels, and explains why so few fishery harbors have been built on this coast. 1.45 Although the distribution and frequency of wind strength and wave activity is similar at sea off the eastern coast of Tunisia to that of the northern part, the coastline itself is exposed mainly to lighter local winds, principally from the NE to SE sector, and waves which rarely exceed 2 m in height. Consequently, there is less need for protection from wave action.  - 14 - II. THE PROJECT A. Project Preparation and Location 2.01 As a follow-up to the First Fisheries Project, the Tunisian Govern- ment requested Bank assistance in financing a new project involving the integrated development of coastal fisheries. Two preliminary studies financed by Government were undertaken by the consulting firms PROJETUD and CEGOS in 1974 and 1976. However, these studies were found to be inadequate as a basis for Project appraisal by an IBRD/FAO CP mission in 1976, and consequently the Tunisian Government in November 1977 employed the engineering consulting firm Societe Generale de Technique et d'Etudes (SGTE) to undertake a critical review of the two earlier studies, and to prepare a complete feasibility study, including detailed engineering and the preparation of tender documents for the port works. This was financed by an advance of US$430,000 from the Bank's Project Preparation Facility. The work of the consultant was supervised jointly by the Ministry of Equipment in Tunisia and IBRD/FAO CP. Pre-appraisal was undertaken in June 1978 by a joint Bank/FAQ CP mission and appraisal took place in October 1978. 2.02 In the course of Project preparation and appraisal 47 sites were visited. By exclusion of sites unsuitable or too costly for development, the number of sites under consideration was gradually reduced to the following 10 sites finally retained: Sidi Daoud, Beni Khiar, Hergla, Salakta, En Najet, La Louata, Mahares, Zarat, Bou Grara, and Adjim. Criteria for retaining sites were (i) technical feasibility of port construction; (ii) least cost alterna- tive; (iii) access to fishing grounds; (iv) availability of human resources; and (v) need of port facilities. B. Project Objectives 2.03 In line with the objectives set forth in the Fifth Development Plan to increase fish production (para. 1.04), the Project aims at contributing to an increase in production of coastal fisheries from 23,800 t in 1977 to about 34,000 t in 1984. Of the total increase of 10,200 t about 8,800 t are attri- butable to the Project. The increase in production will be achieved by satisfying the pressing need for port infrastructure, to permit the existing coastal fishing fleet to undertake more fishing trips per year, and by adding new fishing capacity in the form of new boats. 2.04 A further major objective is the creation of permanent employment for about 1,750 fishermen, which will alleviate the situation of open and hidden unemployment in the agricultural sector. A considerable share of fishermen taking up the new jobs is expected to come from the rural poor. Additional employment will be created in auxiliary industries like boat building and repair, wholesale and retail markets, cooperatives and fisheries supply stores (para 6.02). The Project also aims at improving fish supply  - 15 - and the uneven distribution of fish among the population. Further important objectives are related to institution building: (i) establishment of a central Fisheries Authority with well defined coordinating responsibilities; and (ii) better access to credit for fishermen and improvement of the collections of loan repayments by adequate supervision of subloans. This would result in more funds collected which would be available for relending. 2.05 Project production would also be directed toward earning foreign exchange directly through the export of frozen shrimps and indirectly through the consumption of high quality fish by about one million tourists visiting Tunisia every year. C. Project Description General 2.06 Ports. The Project is designed to meet the objectives outlined in paras. 2.03-2.05 and comprises five main components. Most important in value will be the construction of 10 small fish ports with the required shore facilities to serve as bases for coastal fishing activities along the Tunisian coast. The new port sites will be evenly spread from Cap Bon to the Gulf of Bou Grara. Boat repair facilities, ice making and cold storage equipment for some existing ports will also be made available. 2.07 Boats. The second component will be the construction of 430 coastal inshore fishing boats with inboard engine. Two boat types will be constructed, the existing "IDA-type" of 11.25 m overall length, which is well accepted under the First Fisheries Project, with some small but important modifications; and a new and larger type of 13.80 m overall length with larger working radius and suitable for rougher weather conditions. Spare parts will also be included in this component. 2.08 Training and Technical Assistance. The Project will provide for on-the-job training of fishermen with the help of mobile training units. It will also include the necessary training and demonstration equipment and technical assistance and fellowships for the staff of the newly created Fisheries Authority responsible for the administration of the fisheries subsector and the implementation of the proposed Project. 2.09 Studies. The last Project component will be the preparation of studies for the expansion of the ports in Tabarka and Kelibia, and a study examining the potential of lagoon fishing and research work to determine the exploitable fish stocks and the maximum sustainable yields.  - 16 - Detailed Features Port Facilities 2.10 A summary table of the port facilities envisaged for each of the new or expanded ports follows: Expected Expected Annual No. of Total-a Production Fishermen No. of No. of Investment Cold at Full Using Mooring Jetties Cost/m run Storage Ice Plant Ports Development Facilities Facilities x Length of Berth Capacity Production (t ) (berths) (US$/m) (m3) (t/day) Sidi Daoud 925 225 70 2 x 100 m 5,545 Already Already existing existing Beni Khiar 850 220 85 2 x 100 m 6,850 240 5 Hergla 400 100 64 3 x 60 m 6,750 100 3 Salakta 670 250 94 2 x 100 m 2,028 Available Already in Mahdia existing La Louata 1,000 500 212 7 x 60 mi 3,020 100 5 En Najet 1,800 700 150 5 x 60 m 6,100 240 5 1ahares 1,300 510 1II 3 x 60 m) 11,650 Available 5 I x 80 m) in Sfax Zarat 900 300 90 2 x 100 m 6,533 Available 3 in Gabes Bou Crara 800 270 66 4 x 60 m 5.750 100 5 Adjilm 1,300 490 190 6 x 60 m 3,075 100 5 ka Including service quay. 2.11 All the ports constructed under the Project will have a service quay, jetties and standard shore facilities, which include administration and socio- commercial buildings, a fish hall, a caretaker's house, a slipway, workshops, storerooms, cold storage and ice-making plants. The cold storage capacity  - 17 - will be either 100 m3 or 240 m3 and the ice-making plant production either 3 t/day or 5 t/day, depending on the needs of each port. Jetties of either 100 m, 80 m or 60 m length will be constructed in each port and the boats will be moored perpendicular to them. Distances between jetties will be 41 m, for the Project boats and 25 m for the non-powered boats and the smaller motor boats. The investment cost per m run of berth based on the least cost design was one of the criteria for site selection. The cost at Mahares is relatively high due to the long causeway, the high cost of transporting rock, and the difficult soil conditions which require a special drainage technique. The construction of this port is nonetheless justified as there are no alternative sites for the active fishing activity between Sfax and Skhira Kedima. w 2.12 To increase the quality of production and the efficiency of fishing operations in existing Tunisian ports, the Project will include the financing of ice-making equipment for existing facilities in Ghar El Melh (10 t/day), Monastir (5 t/day), Saiada (5 t/day) and Hount Souk (10 t/day). In Saiada, Monastir and Teboulba, urgently needed ship repair facilities will be con- structed and equipped with the same equipment that is envisaged for the new ports. La Goulette will receive a cold store of 240 m3 to accommodate the incoming catch of coastal and trawler fishing for domestic consumption. Mahdia will receive a freezing tunnel for incoming pelagic and demersal species destined for export. Twenty refrigerated trucks of about 5 t and an additional 20 of 3 t carrying capacity will be provided under the Project for the entities or organizations charged with fish collecting and marketing. These trucks will be insulated and equipped with a compressor connected to the engine. Boats 2.13 11.25 m Boats. The Project will finance about 400 boats of 11.25 m overall length. The boats would predominantly have wooden hulls and inboard diesel engines and would, in design and equipment, be similar to those con- structed and sold under the First Fisheries Project (para. 1.21). Only wooden hulls are accepted by fishermen in Tunisia because (i) they have had no experience with other materials and (ii) they are afraid that ferro-cement and fiberglass boats cannot be repaired. Tests with ferro-cement boats are being undertaken (para. 1.25) but fiberglass boats are virtually unknown. The boats' main technical data would be: overall length 11.25 m, length at water-line 9.05 m, deck width 3.25 m, draft middle and astern 0.86 m, dis- placement 7-7.5 t. The boat hulls would be constructed in Tunisian shipyards which are well equipped for this task and have a sufficiently large capacity (para 1.23). As compared to the boats built under the First Fisheries Proj- ect, a number of small but important technical changes would be introduced. The proposed changes would be directed toward maximum utilization of the boat by (i) making it safer to maneuver in bad weather, (ii) introducing two types of deck plans with superstructure on the aft deck or in front at the buyer's choice, and (iii) giving more comfort to the fishermen so that they are encouraged to undertake more or longer fishing trips. 2.14 Because of the unsatisfactory results experienced by the introduction of a new engine under the First Fisheries Project (paras 1.36 and 1.37), new  - 18 - equipment should not be imposed on fishermen. Boat owners should be given the option to choose between two different engine makes and between manual and electrical starting systems. It would be important to guarantee the avail- ability of spare parts and adequate after-sale service. 2.15 The new boats would be equipped with sufficient quantities of fish- ing gear, consisting normally of gill nets, trammel nets and longlines in accordance with the fishing techniques to be used by the boatowner. 2.16 Upon the request of fishermen, the financing of ferro-cement and fiberglass boats would also be permissible under the Project. The ONP ship- yard in Bizerte has constructed a prototype under an FAQ financed program which has nearly the same dimensions as the wooden 11.25 m boat. The proto- type is successfully operating for ONP in Sidi Daoud. The price for a ferro- cement boat of this type is expected to be in the price range of the wooden boat if built in series. 2.17 The 400 11.25 m boats would mainly be sold in the 10 Project sites (283 boats), but also in existing ports north of Mahdia where, according to fish resource estimates, there is considerable underexploitation of stocks, and in other ports in areas which are not overfished. For fishing along the northern coastline, where seas are rough, especially in winter time, a large type of coastal fishing boat will be introduced with an overall length of 13.80 m. About thirty of those boats would be located in Sidi Daoud (10), La Goulette (3), Bizerte (10) and Tabarka (7). They would have a greater fishing radius to take account of the lower density of harbors at the northern coast and would offer better protection in rough weather. The vessels' main characteristics would be: overall length 13.80 m, length at water line 10.80 m, deck width 3.90 m, maximum draft astern 1.40 m, engine hp about 100. They, too, would have wooden hulls. The investment cost for the 11.25 m boat is estimated to be D 11,502 (US$25,755) and that for the 13.80 m boat D 30,016 (US$75,040). Assurances were obtained during negotiations that Government would alter the Arrete of May 4, 1977 to increase the investment cost ceilings on boats to be considered for lending and subsidies if needed for the imple- mentation of the Project. Institution Building 2.18 Equipment and Vehicles for the Fisheries Authority. The Project will also comprise the establishment, by Government, of the central Fisheries Authority responsible for all regulatory functions within the fisheries sub- sector in Tunisia (para. 3.05-3.06). Following the successful examples of the special "offices" set up for the administration of the irrigated peri- meters in Tunisia this Authority would take the form of a semi-autonomous public agency with legal status and its own budget. It will play an impor- tant role in the implementation of the Project (para. 3.05). To facilitate administration of the new ports, the Project will finance 10 small pick-ups for the regional offices of the Fisheries Authority in charge of the port administration. The Project will focus on on-the-job training of fishermen who are normally not willing to spend several months in a training school or training center. For this purpose, 10 mobile training units will be set up consisting of three instructors and a driver equipped with a van-type vehicle,  - 19 - and all the necessary demonstration equipment. Nine 45 hp boat engines and three 100 hp boat engines would be installed in the most important training schools and training centers for demonstration purposes. 2.19 Technical Assistance for Training. The Project will make available technical assistance to train 40 training instructors for the mobile units and 15 training instructors for training schools and training centers (paras. 3.12 and 3.14). Forty eight man-months of expert service for training purposes will be needed. The Project will also finance 55 fellowships granted to Tunisian instructors at the end of each training course. Studies and Research 2.20 Port Expansion. Feasibility studies for the expansion of the ports in Kelibia and Tabarka will be prepared under the Project because of their importance as cargo and fisheries ports for the development of the Northwest Region. The feasibility studies will include a critical evaluation of the existing technical and economic studies, the necessary geotechnical and hydraulic work, the preparation of preliminary designs and layouts, and the calculation of investment costs. If it is decided that the port expan- sion project should be implemented, the preparation of tender documents and detailed design specifications would follow. Terms of reference for these studies are in the Project File. 2.21 Study of Lagoon Fishing. The Project will also include a compre- hensive study of the possibilities of lagoon fishing mainly in the Lake of El Biban, the Gulf of Bou Grara, the Lake of Tunis and the Lake of Ichkeul. These lagoons with small openings to the sea are considered to have large fish resources which are at present underexploited. 2.22 Research. Under the Project, research work will be undertaken to determine the fish stocks, pelagic as well as demersal, along the entire Tunisian coast line. This work will be undertaken by the Fisheries Authority in collaboration with INSTOP, with the advice of an expert consultant for whom three man-months are envisaged to lay the initial groundwork and make periodic visits at a later date. Status of Engineering 2.23 Ports and Shore Facilities. For all Project sites with the excep- tion of Salakta, detailed engineering has been undertaken for port works and shore facilities, design specifications and costed bills of quantities have been prepared and tender documents are ready. The preliminary design for Salakta has also been made and tender documents are being prepared. Cost estimates for Salakta have an acceptable degree of accuracy because no break- waters are required and only little dredging would have to be done in the existing port basin. Shore facilities for Salakta would be of the standard size used for the other sites too. 2.24 Boats. The design for the 11.25 m Project boat is available. Slight modifications were proposed by a naval architect during pre-appraisal  - 20 - (para 2.13). The new design for the 13.80 m boat was also prepared during pre-appraisal. Tender documents for procurement of hulls and engines for both boat types would be prepared by the Fisheries Authority after Loan signature. D. Cost Estimates 2.25 The total Project cost is estimated to be D 27.0 million (US$67.6 million) of which the foreign exchange component is D 11.3 million (US$28.3 million) or about 42%. A foreign exchange component of 40% is estimated for port infrastructure based on the assumption that the works would be undertaken by a joint venture of foreign and local firms. A foreign exchange component of 15% is applied to other civil works because it is assumed that Tunisian contractors will be awarded these civil works contracts. 2.26 The cost estimates are expressed in projected 1980 prices. Average physical contingencies of 10% are added for port works, other civil works and equipment. Price contingencies for local and foreign exchange components are 6% per annum for 1980 through 1984 in accordance with the projected rates of inflation. Taxes and duties estimated at D 2.6 million (US$6.5 million) and representing 10% of total Project costs are included in the cost estimates. Details of cost estimates are given in Annex 1, Table 1 and are summarized below.  - 21 - Project Cost Estimates Foreign Local Foreign Total Local Foreign Total Exchange - (Dinars '000) (US$'000) % Ports Port Infra- structure 4,902 3,268 8,170 12,255 8,170 20,425 40 Buildings 2,041 360 2,401 5,103 900 6,003 15 Equipment /a 775 758 1,533 1,937 1,895 3,832 50 Subtotal 7,718 4,386 12,104 19,295 10,965 30,260 36 Equipment for Existing Ports Civil Works 47 8 55 118 20 138 15 Equipment 640 783 1,423 1,600 1,957 3,557 55 Subtotal 687 791 1,478 1,718 1,977 3,695 54 Supervision of Construction and Installation 528 237 765 1,320 593 1,913 31 Boats and Spare Parts 2,265 3,397 5,662 5,663 8,492 14,155 60 Training and Institution Building Equipment 80 108 188 200 270 470 57 Training/ Fellowships 28 131 159 70 328 398 82 Incremental Local Person- nel Costs /b 1,268 - 1,268 3,170 - 3,170 0 Subtotal 1,376 239 1,615 3,440 598 4,038 15 Studies and Research 194 350 544 485 875 1,360 65 Base Costs Without Contingencies 12,768 9,400 22,168 31,921 23,500 55,421 42 Contingencies Physical 872 508 1,380 2,180 1,270 3,450 37 Price 2,058 1,406 3,464 5,145 3,515 8,660 40 Subtotal 2,930 1,914 4,844 7,325 4,785 12,110 39 Total Project Cost 15,698 11,314 27,oi2 39,246 28,285 67,531 42 /a Includes working capital for shipyards. /b Includes local instructors, incremental personnel costs of Fisheries Authority and loan administration BNT. NOTE: Discrepancies due to rounding.  - 22 - E. Financing 2.27 The proposed Bank Loan of US$28.5 million will be made to the Tunisian Government and will finance the foreign exchange cost of the Proj- ect. The proposed financing plan is given below: Sub- IBRD borrowers Government BNT Loan Total --------------- US$ million --------------- New Ports Civil Works - 21.1 - 11.1 32.2 Equipment - 2.5 - 2.2 4.7 Existing Ports - 1.8 - 1.8 3.6 Supervision of Construction - 1.4 - 0.8 2.2 Boats 1.6 4.9 - 9.8 16.3 Training Technical Assistance - 0.1 - 0.3 0.4 Local Personnel - 1.2 - - 1.2 Fellowships - - - 0.1 0.1 Equipment - 0.2 - 0.3 0.5 Vehicles Refrigerated Trucks - 1.0 - 1.2 2.2 Ports - 0.2 - 0.1 0.3 Incremental Personnel Cost - 2.0 0.5 - 2.5 Study under Project Preparation Facility - 0.3 - 0.4 0.7 Other Studies - 0.3 - 0.4 0.7 1.6 37.0 0.5 28.5 67.6 2.28 Goverment contributions will be made to:  - 23 - (i) The Harbor Department to cover the local expenditure of civil works and equipment in the Project sites (US$25.4 million equivalent) of supervision of construction and instal- lation (US$1.4 million equivalent) and of the feasibility studies for the expansion of the ports of Kelibia and Tabarka (US$0.2 million equivalent). Local funds of US$0.3 million equivalent have already been paid by the Harbor Department for the Project feasibility study financed under the Bank's Project Preparation Facility; (ii) the Fisheries Authority to cover the local expenditure of training equipment (US$0.2 million equivalent), of technical assistance for training and various studies (US$0.2 million equivalent), of refrigerated trucks and other vehicles (US$1.2 million equivalent) and its incremental personnel cost including cost of instructors (US$3.2 million equivalent); and (iii) BNT to cover the local expenditure of boat construction (US$4.9 million equivalent). 2.29 These Government contributions will be equity contributions and allocations to the budgets of the Harbor Department and the Fisheries Authority. A Project Agreement with BNT will specify the conditions under which Government and Bank funds will be given to BNT under a Subsidiary Loan Agreement (para. 2.33). US$2.45 million equivalent of Government funds will be given as subsidies for the fishermen's acquisition of boats (15% of invest- ment cost) and an equal amount as loans (para. 2.33). 2.30 Bank funds will be made available to Government and passed on to: (i) The Harbor Department to cover the foreign expenditure of civil works and equipment in the ten port sites (US$13.3 million) and in the existing ports (US$1.8 million), of supervision of construction and installation (US$0.8 million) and of the feasibility studies for Kelibia and Tabarka (US$0.25 million). An amount of US$0.4 million is being disbursed under an advance from the Bank's Project Preparation Facility; (ii) the Fisheries Authority to cover the foreign expenditure of training equipment (US$0.3 million) of technical assistance for training, various studies and fellowships (US$0.55 million) and of refrigerated trucks and other vehicles (US$1.3 million); and (iii) BNT to cover the foreign expenditure of boat construction (US$9.8 million).  - 24 - 2.31 The Bank funds will be allocated to the budgets of the Harbor Department and the Fisheries Authority. Funds for BNT will be given as a loan (para. 2.33). 2.32 BNT will contribute the personnel cost for the subloan recovery system (total US$0.5 million equivalent). 2.33 During negotiations, assurances were obtained that the Government, prior to Loan Effectiveness, will conclude an agreement with the Fisheries Authority regarding channelling of Government and Bank funds. Assurances were also obtained that prior to Loan Effectiveness, a Subsidiary Loan Agreement with BNT will be concluded to specify that BNT will obtain Government and Bank funds (total of US$12.3 million equivalent) at 2.5% interest for 12 years, including five years of grace. A 3.5% interest spread is necessary to cover BNT's administrative cost, prefinancing contract payments and the lending risk. Subloans to Fishermen will be made at the FOSEP current interest rate of 6%. This rate is the same as that charged for agricultural lending and is about the same as the past and projected rates of inflation in Tunisia (1975:5.4%, 1977: 6.7%, 1978: 5.3%; 1979-1981: 6%). The FOSEP also provides for 15% subsidy (para. 1.26). Sublending conditions under the Project are outlined in para. 3.07. They will be reviewed periodically to determine their justification and will be adjusted if required. In compliance with the Government Policy to have banking institutions assume a greater portion of the lending risk (Supplementary letter No. 2 to Loan Agreement No. 1340 TUN of December 17, 1976), BNT will assume 25% of the default risk on sub- loans granted throughout Project implementation. Assurances were obtained during negotiations that the Government will maintain this policy and will periodically review the rates of BNT's risk assumption. 2.34 Fishermen will contribute 10% of boat investment cost (US$1.6 million equivalent). Project Preparation Facility 2.35 The feasibility study for this Project, including detailed engineer- ing and preparation of tender documents, amounted to D 292,852 (US$732,130). The Bank financed part of the foreign exchange component amounting to US$430,000 under the Bank's Project Preparation Facility. The cost of this study has been included in the Project cost and the amount advanced by the Bank will be refinanced under the proposed Loan. F. Procurement 2.36 Ports. Contracts for port construction including delivery and installation of equipment in the ten new port sites as well as in the exist- ing ports will be grouped together in lots (para. 2.40) by the Harbor Depart- ment and will be tendered under procurement procedures consistent with Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977. Contracts not exceeding the cost of  - 25 - US$250,000 equivalent for civil works and US$100,000 equivalent for equip- ment will be let under competitive bidding procedures, advertised locally, provided that the aggregate amount of all such contracts will not exceed US$750,000 equivalent for civil works and US$300,000 equivalent for equip- ment. Assurances to this effect were obtained during negotiations. 2.37 Boats and Boat Equipment. Since the capacity of Tunisian shipyards is sufficiently large to guarantee adequate competition and since experience shows that competition from foreign boat yards for wooden hulls is highly improbable, these hulls will be procured by the Fisheries Authority on the basis of competitive bidding advertised locally. The Authority will have the option to enter into contracts with several shipyards in order to arrive at more rapid delivery. Fishing gear and boat diesel engines will be procured under international competitive bidding procedures. For the procurement if l'- 45 hp engines the Authority may reserve the right to enter into contracts with up to two engine suppliers in order to take account of fishermen's preferences. Each engine supplier (two for the 45 hp and one for the 100 hp engines) will be asked to maintain a central consignment stock of spare parts with the Authority in Tunis. The entities operating the ship repair facili- ties at the various port sites will purchase spare parts from this consignment stock through the Authority. Assurances to this effect were obtained during negotiations. 2.38 Vehicles. The Fisheries Authority will purchase the 40 refrigerated trucks under international competitive bidding procedures and the ten pick-ups and 10 vans under competitive bidding procedures advertised locally. 2.39 Margin of Preference and Advertisement. Assurances were obtained during negotiations that Tunisian manufacturers will be granted a margin of preference in bid evaluations for goods manufactured in Tunisia, and that amenclments to contracts adding or deleting more than 16% of their respective value will not be made without the prior concurrence of the Bank. The Harbor Department and/or the Fisheries Authority will provide general procurement notices in a timely manner for publication in the UN Development Forum. 2.40 Procurement Lots. It is estimated that procurement for port infra- structure will be done in three lots, the first to comprise the port works at Sidi Daoud, Beni Khiar and Hergla (about US$7.8 million), the second the port works at Salakta, La Louata and Mahares (about US$9 million) and the third the port works at En Najet, Zarat, Adjim and Bou Grara (about US$8.5 million). Similarly about three contracts would be let for civil works of shore facili- ties in the same groups of ports (about US$2.4 million, US$2.6 million and US$3.6 million respectively). Equipment for all new and existing ports would be combined in one contract (about US$8.8 million). 2.41 Boats. For boat hulls about nine contracts will be awarded to Tunisian shipyards, three in 1980 for a period covering approximately 18 months, three in 1981 for another 18 months and three in 1983 for the remain- ing number of hulls. Total estimated contract value for hulls is D 3.7 million (US$9.3 million). Upon special request of fishermen, fully equipped  - 26 - ferro-cement or fiberglass boats will be purchased through negotiated con- tracts provided that the estimated amount of contracts for such boats within any twelve-month period does not exceed the equivalent of US$100,000. 2.42 Under the assumption that contracts for boat engines would be awarded to three different suppliers (two suppliers for the 45 hp and one for the 100 hp engines), it is estimated that seven contracts would be let. The contract for the 100 hp engines would be let in 1980 and the six contracts for the 45 hp engines would be awarded with the same phasing as indicated above for the hulls. The combined value for all boat engines including spare parts is estimated to be D 2.0 million (US$4.9 million). 2.43 For fishing gear three contracts will be let with the same